OREANDA-NEWS. October 08, 2010. Speaking at an investment forum in Moscow, Prime Minister Vladimir Putin said that Russia’s sovereign debt will continue to grow in the coming years, but its level will not exceed 20% of GDP. He added that by 2015 Russia plans to return to a balanced budget. At the same conference, Finance Minister Aleksei Kudrin said that currently Russia’s state debt equals 10.5% of GDP and could increase to 11% of GDP by the start of next year, reported the press-centre of OTKRITIE Financial Corporation.

View: Both statements are in line with the state debt projections made in the draft federal budget law that was submitted by the government to the Duma last week. We believe that these projections are very conservative and that the reality will demand far lower volumes of new state debt issuance. We estimate that the government will receive higher revenues than planned while its expenditures could well be lower.

This is even if one takes into consideration the expected rise in social spending during next year’s electoral campaigns. Therefore, we would not be surprised to see next year’s Reserve Fund at levels close to the current ones and we forecast that the Fund could start to grow in 2012 - that is, 3 years earlier than the government is expecting. In 2010, we forecast the federal budget deficit to reach 1.8% of GDP (versus the 5.3% government estimate), and in 2011 we see it at just 0.5% of GDP (the 2011 federal deficit is set at 3.6% of GDP in the new budget).